Power plants running out of coal, imports to surge

NEW DELHI Tue Jul 8, 2014 4:27pm IST

A labourer unloads coal from a supply truck at a yard on the outskirts of Ahmedabad August 21, 2013. REUTERS/Amit Dave/Files

A labourer unloads coal from a supply truck at a yard on the outskirts of Ahmedabad August 21, 2013.

Credit: Reuters/Amit Dave/Files

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NEW DELHI (Reuters) - Nearly half of India's coal-fired power plants have only enough stocks to last a week or less, a shortage that could become critical and drive up thermal coal imports by 14 percent as weak monsoon rains are expected to cut output from hydropower.

State behemoth Coal India (COAL.NS), the world's largest coal miner, has failed to raise its output fast enough to meet demand, and millions of Indians still go without power.

Blackouts are frequent, something new Prime Minister Narendra Modi is keen to fix, but that would require increasing coal shipments from Indonesia, Australia and South Africa.

Shipments of thermal coal, used in power generation, could rise about 14 percent to 152 million tonnes this year, according to commodities trader mjunction, a joint venture of Steel Authority of India Ltd (SAIL.NS) and Tata Steel (TISC.NS).

A New Delhi-based trader, whose firm imports mainly from Indonesia for power companies in India, said his clients have already asked for more shipments as poor rains will force farmers to use more power to run their irrigation equipment.

"On the one hand you have less hydro electricity, and on the other you have more demand from the agricultural sector," said the trader, who did not want to be named as he is not authorised to talk to media.

Coal is used to fire more than half of India's electricity, while power from dams accounts for about a fifth.

With the weather office expecting below-average monsoon rains this year and private forecaster Skymet forecasting a 60 percent chance of a drought, however, more coal could be needed to make up for lower-than-normal hydropower output.

Weak monsoon rains contributed to one of the world's worst blackouts in 2012, when hundreds of millions were left without power. (reut.rs/1tiqzBC)

Power Minister Piyush Goyal on Monday urged power companies to raise thermal imports after saying that 26 out of 100 coal-based power plants in India had "super critical coal stocks" - or only enough to meet requirements for less than four days.

A total of 44 plants, including the super critical ones, have "critical coal stocks" - only sufficient for less than a week - with the majority of these in the state of Maharashtra.

"India's coal imports will continue to rise considering the fact that there are still a lot of new power plants coming up," said Viresh Oberoi, chief executive of mjunction.

The new plants will need coal, and since domestic supply to the plants is guaranteed only up to 60 percent of their total requirement, they will have to buy more imported coal to operate at optimum levels, he said.

India is already the world's third-largest coal importer despite sitting on the fifth largest reserves, mainly due to delays in securing environmental clearances to add new mines and to build facilities to transport coal from remote mines.

Coal-fired power plants are expected to see demand of 551.60 million tonnes this fiscal year ending March 31, but domestic supply will be limited to 466.89 million, Goyal said.

In April-June, Coal India supplied 88.66 million tonnes to power companies against a target of 101.61 million.

Thermal coal imports rose as a result, shooting up 11 percent from a year earlier to 14.77 million tonnes in June, according to mjunction.

(Editing by Tom Hogue)

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